Antonio Urcelay, Chairman of the Board of Directors and Chief Executive
Officer, Toys“R”Us, Inc., said, “We are pleased with the improvement in
our Adjusted EBITDA for the quarter as we continue to take the prudent
and necessary steps to strengthen the foundation of our business. For
the second consecutive quarter, we have delivered positive comparable
store net sales results in both our U.S. and International segments. We
believe our International business as a whole has begun to rebound after
several years of market weakness, with net sales increases in Japan and
the United Kingdom among others. Our business in China and Southeast
Asia remains strong, and we continue our expansion in this region of the
world.”

Mr. Urcelay continued, “During the second quarter, we completed the
inventory clearance effort in our U.S. stores which began at the start
of the fiscal year. While this resulted in a decline in margin rate in
the interim, we believe it has significantly improved the overall health
of our inventory and has us well-positioned for the influx of hot new
products as we approach the holiday selling season. The actions we have
taken during the first half of the year in implementing our “TRU
Transformation” strategy, including strengthening our in-stock
position, optimizing our inventory, implementing a clearer pricing
strategy and simplifying promotions, should result in a much-improved
shopping experience for our customers in the important months ahead.”

Second Quarter Highlights

Consolidated net sales were $2.4 billion, an increase of 2.7% versus
the prior year period. Excluding the impact of foreign currency
translation which increased net sales by $7 million, the Company
experienced an improvement in net sales of $56 million or 2.4%. The
growth was primarily a result of an increase in comparable store net
sales in both the Domestic and International segments and new stores
in the International segment.

Domestic comparable store net sales were up 1.5% primarily driven by
increases in the core toy, learning and entertainment (which includes
electronics, video game hardware and software) categories.
International comparable store net sales were up 2.5% primarily due to
increases in the core toy, learning and seasonal categories.

Gross margin dollars were $916 million, compared to $920 million for
the prior year period, a decrease of $4 million. Foreign currency
translation increased gross margin dollars by $4 million. Gross
margin, as a percentage of net sales, was 37.5%, a decrease of 1.2
percentage points versus the prior year period. The reduction was
primarily attributable to Domestic margin rate decline resulting from
an incremental $19 million loss on previously identified clearance
inventory. The International segment had an increase in gross margin
dollars of $21 million while gross margin, as a percentage of net
sales, decreased by 0.2 percentage points versus the prior year period.

Selling, general and administrative expenses (“SG&A”) were $878
million, compared to $890 million in the prior year, a decrease of $12
million. Foreign currency translation increased SG&A by $4 million.
Excluding the impact of foreign currency translation, the reduction in
SG&A was primarily due to a $20 million decrease in legal expenses
related to a prior year adverse litigation judgment and $7 million in
favorable insurance claim settlements in the current year related to
property losses, partially offset by a $6 million increase in
occupancy costs, predominantly as a result of an increase in new
stores in the International segment and an increase in common area
maintenance expenses.

Adjusted EBITDA1 was $81 million, compared to $74 million
in the prior year, an increase of $7 million or 9.5%.

Operating loss was $42 million, compared to an operating loss of $46
million in the prior year. Domestic segment operating earnings were
$25 million lower primarily due to the inventory clearance efforts,
while the International segment operating performance improved by $14
million primarily due to higher gross margin dollars, partially offset
by an increase in SG&A. Corporate expenses were $15 million lower
resulting from the reduction in legal expenses mentioned above.

Net loss was $148 million, compared to a net loss of $113 million in
the prior year primarily due to a net increase in income taxes of $52
million as the Company concluded in the third quarter of fiscal 2013
that it is more likely than not that a benefit for losses in the U.S.
and certain foreign jurisdictions will not be realized in the
foreseeable future. This was partially offset by reductions in
interest expense of $14 million.

Liquidity and Capital Spending

The Company ended the second quarter with $1.2 billion of liquidity,
which included cash and cash equivalents of $353 million and unused
availability under committed lines of credit of $823 million.

Through the end of the second quarter of fiscal 2014, the Company
invested $86 million primarily for improvements to information
technology and logistics systems and capabilities, store-related
projects and opening of new stores, compared to $110 million in the
prior year.

Further information regarding the Company’s financial performance in the
second quarter of fiscal 2014 will be presented in its quarterly report
on Form 10-Q, which the Company plans to file with the Securities and
Exchange Commission on or about September 10, 2014.

1 A detailed description and reconciliation of EBITDA and
Adjusted EBITDA, and management’s reasons for using these measures, are
set forth at the end of this press release.

About Toys“R”Us, Inc.

Toys“R”Us, Inc. is the world’s leading dedicated toy and juvenile
products retailer, offering a differentiated shopping experience through
its family of brands. Merchandise is sold in 877 Toys“R”Us and
Babies“R”Us stores in the United States and Puerto Rico, and in more
than 710 international stores and over 190 licensed stores in 35 foreign
countries and jurisdictions. In addition, it exclusively operates the
legendary FAO Schwarz brand and sells extraordinary toys in the brand’s
flagship store on Fifth Avenue in New York City. With its strong
portfolio of e-commerce sites including Toysrus.com,
Babiesrus.com,
eToys.com
and FAO.com,
it provides shoppers with a broad online selection of distinctive toy
and baby products. Headquartered in Wayne, NJ, Toys“R”Us, Inc. employs
approximately 70,000 associates annually worldwide. The Company is
committed to serving its communities as a caring and reputable neighbor
through programs dedicated to keeping kids safe and helping them in
times of need. Additional information about Toys“R”Us, Inc. can be found
on Toysrusinc.com.

Forward-Looking Statements

All statements that are not historical facts in this press release,
including statements about our beliefs or expectations, are
forward-looking statements. These statements are subject to risks,
uncertainties and other factors, including, among others, the
seasonality of our business, competition in the retail industry, changes
in our product distribution mix and distribution channels, general
economic factors in the United States and other countries in which we
conduct our business, consumer spending patterns, our ability to
implement our strategy including implementing initiatives for season,
the availability of adequate financing, access to trade credit, changes
in consumer preferences, changes in employment legislation, our
dependence on key vendors for our merchandise, political and other
developments associated with our international operations, costs of
goods that we sell, labor costs, transportation costs, domestic and
international events affecting the delivery of toys and other products
to our stores, product safety issues including product recalls, the
existence of adverse litigation, changes in laws that impact our
business, our substantial level of indebtedness and related debt-service
obligations, restrictions imposed by covenants in our debt agreements
and other risks, uncertainties and factors set forth in our reports and
documents filed with the Securities and Exchange Commission (which
reports and documents should be read in conjunction with this press
release). In addition, we typically earn a disproportionate part of our
annual operating earnings in the fourth quarter as a result of seasonal
buying patterns and these buying patterns are difficult to forecast with
certainty. We believe that all forward-looking statements are based on
reasonable assumptions when made; however, we caution that it is
impossible to predict actual results or outcomes or the effects of
risks, uncertainties or other factors on anticipated results or outcomes
and that, accordingly, one should not place undue reliance on these
statements. Forward-looking statements speak only as of the date they
were made, and we undertake no obligation to update these statements in
light of subsequent events or developments unless required by the
Securities and Exchange Commission’s rules and regulations. Actual
results and outcomes may differ materially from anticipated results or
outcomes discussed in any forward-looking statement.

Adjustments to reconcile Net loss to Net cash used in operating
activities:

Depreciation and amortization

199

195

Amortization and write-off of debt issuance costs and debt discount

23

24

Deferred income taxes

4

(11)

Other

10

1

Changes in operating assets and liabilities:

Accounts and other receivables

27

41

Merchandise inventories

(166)

(163)

Prepaid expenses and other operating assets

(22)

(20)

Accounts payable, Accrued expenses and other liabilities

(304)

(199)

Income taxes payable and receivable

(25)

(157)

Net cash used in operating activities

(597)

(513)

Cash Flows from Investing Activities:

Capital expenditures

(86)

(110)

Proceeds from sales of fixed assets

9

23

Increase in restricted cash

(1)

(28)

Proceeds from redemption of debt securities

-

52

Purchases of debt securities

-

(20)

Net cash used in investing activities

(78)

(83)

Cash Flows from Financing Activities:

Long-term debt borrowings

735

1,237

Long-term debt repayments

(341)

(1,252)

Capitalized debt issuance costs

(13)

(26)

Short-term debt borrowings, net

-

3

Repurchase of common stock

-

(7)

Net cash provided by (used in) financing activities

381

(45)

Effect of exchange rate changes on Cash and cash equivalents

3

(13)

Cash and cash equivalents:

Net decrease during period

(291)

(654)

Cash and cash equivalents at beginning of period

644

1,118

Cash and cash equivalents at end of period

$

353

$

464

OPERATING METRICS

(Unaudited)

13 Weeks Ended

26 Weeks Ended

August 2,2014

August 3,2013

August 2,2014

August 3,2013

Domestic Segment:

Operating Data

Gross margin as a percentage of net sales

34.7%

36.6%

35.2%

36.5%

Comparable store net sales (1)

1.5%

(4.1%)

2.7%

(6.2%)

Net Sales by Product Category

Baby

47.6%

48.6%

48.8%

49.9%

Core Toy

13.2%

11.9%

12.6%

11.8%

Entertainment

6.3%

5.7%

7.1%

6.5%

Learning

17.6%

16.8%

17.5%

16.6%

Seasonal

15.0%

15.3%

13.7%

14.1%

Other (2)

0.3%

1.7%

0.3%

1.1%

Total

100%

100%

100%

100%

International Segment:

Operating Data

Gross margin as a percentage of net sales

41.8%

42.0%

40.6%

40.5%

Comparable store net sales

2.5%

(3.8%)

1.7%

(4.8%)

Net Sales by Product Category

Baby

25.0%

26.4%

26.0%

26.6%

Core Toy

19.7%

19.0%

19.6%

19.2%

Entertainment

7.1%

7.1%

7.3%

8.1%

Learning

25.8%

25.1%

26.1%

25.7%

Seasonal

21.5%

21.5%

20.1%

19.5%

Other (3)

0.9%

0.9%

0.9%

0.9%

Total

100%

100%

100%

100%

(1)

Prior year excludes the effect of an out of period adjustment.
Previously reported comparable store net sales were (3.5)% and
(6.0)% for the thirteen and twenty-six weeks ended August 3, 2013,
respectively.

(2)

Consists primarily of non-product related revenues.

(3)

Consists primarily of licensing fees from unaffiliated third parties
and other non-product related revenues.

Non-GAAP Disclosure of EBITDA and Adjusted EBITDA

We believe Adjusted EBITDA is useful to investors because it is
frequently used by securities analysts, investors and other interested
parties in the evaluation of companies in our industry. Investors of the
Company regularly request Adjusted EBITDA as a supplemental analytical
measure to, and in conjunction with, the Company’s GAAP financial data.
We understand that investors use Adjusted EBITDA, among other things, to
assess our period-to-period operating performance and to gain insight
into the manner in which management analyzes operating performance.

In addition, we believe that Adjusted EBITDA is useful in evaluating our
operating performance compared to that of other companies in our
industry because the calculation of EBITDA and Adjusted EBITDA generally
eliminates the effects of financing and income taxes and the accounting
effects of capital spending and acquisitions, which items may vary for
different companies for reasons unrelated to overall operating
performance. We use the non-GAAP financial measures for planning and
forecasting and measuring results against the forecast and in certain
cases we use similar measures for bonus targets for certain of our
employees. Using several measures to evaluate the business allows us and
investors to assess our relative performance against our competitors.

Although we believe that Adjusted EBITDA can make an evaluation of our
operating performance more consistent because it removes items that do
not reflect our core operations, other companies, even in the same
industry, may define Adjusted EBITDA differently than we do. As a
result, it may be difficult to use Adjusted EBITDA or similarly named
non-GAAP measures that other companies may use to compare the
performance of those companies to our performance. The Company does not,
and investors should not, place undue reliance on EBITDA or Adjusted
EBITDA as measures of operating performance.

A reconciliation of Net loss attributable to Toys “R” Us, Inc. to
EBITDA and Adjusted EBITDA for Toys “R” Us, Inc. is as follows:

13 Weeks Ended

26 Weeks Ended

(In millions)

August 2,2014

August 3,2013

August 2,2014

August 3,2013

Net loss attributable to Toys “R” Us, Inc.

$

(148)

$

(113)

$

(344)

$

(224)

Add:

Income tax expense (benefit)

4

(48)

2

(121)

Interest expense, net

101

115

208

226

Depreciation and amortization

95

95

199

195

EBITDA

52

49

65

76

Adjustments:

Sponsors’ management and advisory fees (a)

6

5

12

11

Litigation expense (b)

-

20

-

20

Severance

4

9

9

13

Store closure costs

(1)

-

4

-

Impairment of long-lived assets (c)

4

1

7

3

Net gains on sales of properties

(3)

(5)

(3)

(7)

Compensation expense (d)

5

(2)

5

(1)

Property losses, net of insurance recoveries (e)

(7)

-

(7)

-

Obsolete inventory clearane (f)

19

-

8

-

Other (g)

2

(3)

2

-

Adjusted EBITDA (h)(i)

$

81

$

74

$

102

$

115

A reconciliation of Net loss to EBITDA and Adjusted EBITDA for
Toys “R” Us-Delaware, Inc. is as follows:

Asset impairments primarily due to the identification of
underperforming stores and the relocation of certain stores.

(d)

Represents the incremental compensation expense related to certain
one-time awards, net of forfeitures of certain officers' awards.
Commencing in the second quarter of fiscal 2014, we have revised our
definition of Adjusted EBITDA to include the impact of forfeitures
of certain officers' awards and have therefore revised our prior
year's Adjusted EBITDA.

Represents miscellaneous other charges which were not individually
significant for separate disclosure.

(h)

Adjusted EBITDA is defined as EBITDA (earnings before net interest
income (expense), income tax expense (benefit), depreciation and
amortization), as further adjusted to exclude the effects of certain
income and expense items that management believes make it more
difficult to assess the Company’s actual operating performance
including certain items which are generally non-recurring. We have
historically excluded the impact of such items from internal
performance assessments. We believe that excluding items such as
Sponsors’ management and advisory fees, asset impairment charges,
restructuring charges, impact of litigation, noncontrolling
interest, net gains on sales of properties and other charges, helps
investors compare our operating performance with our results in
prior periods. We believe it is appropriate to exclude these items
as they are not related to ongoing operating performance and,
therefore, limit comparability between periods and between us and
similar companies.

(i)

The primary differences between consolidated Toys “R” Us, Inc.
Adjusted EBITDA and Toys “R” Us-Delaware, Inc. Adjusted EBITDA are
the exclusion of the results of International operations (with the
exception of Toys “R” Us-Canada), as well as the inclusion of rent
expense payable by Toys “R” Us-Delaware, Inc. to Toys “R” Us
Property Company I, LLC (pursuant to a master lease agreement) and
income from license fees charged by Toys “R” Us-Delaware, Inc. to
foreign affiliates for use of intellectual property.